Discharge

Question 1

5 ways a contract might be discharged

Answer 1

a. performance
b. expiry
c. agreement
d. breach
e. frustration

Question 2

What is meant by discharge by expiration?

Answer 2

A contract will expire when it is completed according to its own terms.
- Contract expiration is often by date ie the parties incorporate a term in the contract which stipulates when the contract comes to an end.

Question 4

What are the 4 exceptions to the entire completion rule (complete performance)?

Answer 4

(1) Acceptance of partial performance;
(2) Substantial performance;
(3) Divisible obligations;
(4) Wrongful prevention of performance.

Question 5

Acceptance of partial performance as an exception to the complete performance rule

Answer 5

Where one party has given only partial performance of contractual obligations, it’s possible that innocent party, might accept that part of performance.
- at their discretion
- once accepted, party will be entitled to payment on a quantum merit basis (meaning as much as is deserved).

Question 6

Substantial performance as an exception to the complete performance rule

Answer 6

More than a partial performance
- obligation to pay full contract price, minus cost of remedying defects.
- Court’s question is whether the defect goes ‘to the root of the contract’ to decide what ‘substantial performance’ is.

Question 7

Divisible obligations as an exception to the complete performance rule

Answer 7

Where contract allows for performance of one or more obligations separately from others

Question 7

Wrongful prevention of performance as an exception to the complete performance rule

Answer 7

Where party 1 performs part of obligation but is prevented of completing entirely due to third party’s fault, party 1 is entitled to payment despite incompletion with 2 choices:

1- To sue for damages for breach of contract; or
2- To claim a quantum meruit.

Question 8

2 ways discharge by agreement may occur

Answer 8

a. by a subsequent contract between the parties

b. by operation of a term of the original contract

Question 9

discharge by subsequent binding contract

Answer 9

Where parties in a contract haven’t completed obligations and no consideration is given, a mutual waiver of performance constitutes consideration

Question 10

Repudiatory breach

Answer 10

where one party has breached a term of the contract which is either a condition, or an innominate term which is treated as a condition, entitling the other party to treat the contract as terminated

Question 11

what 2 elements must be present in order for a discharge to be effective?

Answer 11

accord and satisfaction
- there must be agreement that the obligation will be released (‘accord’), and there must be consideration for the promise to release a party from the obligation (‘satisfaction’).

Question 12

meaning of a condition precedent

Answer 12

It is a condition in a contract that must be fulfilled before the contract itself or certain contractual rights or obligations become binding

Question 13

Anticipatory breach

Answer 13

where a party indicates they will not perform their contractual obligations in advance of the date for performance

Question 14

What is the effect of terminating a contract for repudiatory breach?

Answer 14

it puts an end to all primary obligations of both parties remaining unperformed

Question 15

Benefits of affirmation (intention to continue with contract)

Answer 15

the contract survives and the rights of the innocent party are preserved.

Question 16

Limitations of the innocent party’s right to affirm the contract in response to a repudiatory breach

Answer 16

1. the cooperation of the breaching party is required for continued performance of the contract
2. the innocent party has no ‘legitimate interest, financial or otherwise/ in affirming the contract and continuing with performance

Question 17

Meaning of frustration (discharge by frustration)

Answer 17

without default of either party, a contractual obligation has become incapable of being performed.
- beyond the control of either party,
- occurs after formation of contract
- which render contract radically different from what was agreed at time of contract

Question 18

What is meant for frustration to be radically different due to performance being impossible?

Answer 18

• destruction or unavailability of a thing / person necessary to perform the contract
• person= due to death or incapacity

Question 18

For what reasons may performance be radically different?

Answer 18

• performance is illegal
• performance is impossible
• common purpose is frustrated

If a contract is frustrated, it is brought to an end automatically: the parties have no choice in the matter.

Question 19

What is meant for frustration to be radically different due to performance being illegal?

Answer 19

Frustration may also occur where a change in the law or state intervention renders performance illegal.

Question 20

What is meant for frustration to be radically different due to common purpose being frustrated?

Answer 20

Non-occurrence of an event can frustrate purpose of contract if event was central to the common purpose of both parties the fact that it is still physically possible to carry out the contract.

Question 21

What elements act as a limitation for frustration of contracts?

Answer 21

-Supervening: (event occurs between agreement and performance)
-Unforeseeable: (event must not have been foreseen by parties)
-Neither party’s fault
-Merely an increase in expense
-Provided in the contract

Question 22

Which act deals with the legal consequences of frustration of contract and which obligations does it deal with?

Answer 22

Law Reform (Frustrated Contracts) Act 1943
- Act deals with obligations arising prior to the frustrating event not future obligations.